Legal payment terms, update

Since July 2018, the statutory payment term has been slightly changed in favor of SMEs. Most important change: large companies must pay within 60 days. Exceptions are no longer possible. This is actually a scheme that determines when interest is due. After the payment term has expired, the statutory interest for commercial transactions or the agreed interest is due. This is cumulated annually. So interest on interest.

Explanation of the scheme as of July 1, 2018:

Without agreements about payment terms, the payment term is:  

• 30 days after receipt of the invoice (not after the invoice date) for retrospective invoicing
• 30 days after receipt of the goods/services if invoiced in advance
• 30 days after acceptance if an acceptance test has been agreed or if the customer does not carry out an acceptance test within that period, 30 days after the acceptance period. The following regarding the acceptance period: Parties can agree on a period of more than 30 days for this test (max. 60 days for government). That period may not be unfair, which in particular means that there must be an objective reason for it and that it must not be unusual for the delivery in question and must be related to the nature of the delivery.

Of Agreements regarding the payment arrangement apply as follows:

If the supplier is an SME company and the customer is a large company, a maximum period of 60 days applies. Longer terms are null and void and will be replaced by a term of 30 days.

If the customer and supplier are both SMEs, they may only agree on a longer term than 60 days if this is not manifestly unfair. This means in particular that there must be objective reasons for this, that it must not be unusual for the delivery in question and that it must be related to the nature of the delivery.

Moreover, a large company exists if two of the following three conditions are met:

• Net annual turnover > 40 million euros
• More than 250 employees
• Assets > 20 million euros

Some examples in which a longer payment term than 60 days is not manifestly unfair to the creditor (the supplier):

• delivery on consignment, where suppliers are only paid after the buyer has sold the delivered goods;
• if one party is a start-up company to which a longer payment term is granted in the context of the development of the commercial relationship between both parties;
• agreeing on a longer payment term to give a permanent trading relationship that is temporarily experiencing liquidity problems some more financial space.

And when the customer does not pay or pays late?

If the customer does not pay the invoice or pays it late, collection costs are due. The (business) customer is in default by law if he does not pay within the payment term as described above. If the parties have not agreed on the amount of the compensation, the compensation will be a percentage of the bill with a minimum of € 40, as shown below.  

In addition, statutory interest may be charged. There are many useful tools on the internet for calculating this. Many companies send one or more reminder letters. It is advisable to have the contents checked by a lawyer so that any collection process runs smoothly.

© mr. ing. FHG Meijers MBA / October 8, 2018